Community Redevelopment Agency Expansion Not Seen Hurting Miami Bond Rating

By Risa Polansky
It’s difficult to project how a plan to expand Miami’s community redevelopment agencies’ boundaries could affect the city’s bond ratings, experts say, but one public finance lawyer queried suspects that impact could be insignificant.

The city and Miami-Dade County have agreed to enlarge two redevelopment districts in order to generate funds to back a series of large-scale projects, shrinking the amount of property tax revenues generated within those areas that would normally feed into general funds.

Spokespeople from rating agencies Moody’s and Standard & Poor said the firms would not speculate on how a municipality’s bond rating could change as a result.

Attorney Jeff DeCarlo, a partner with Adorno & Yoss and chair of its Public Finance Practice Group, said the agency expansion aspect of the governments’ plan is unlikely to take a significant toll on bond ratings.

"It’s not like you’re taking away the whole area tax base," he said. "It really depends on the extent of what’s being siphoned off."

A community redevelopment agency generates funds by capping the value of real property in the area.

As property values appreciate, the city and county collect only the tax revenues on the capped value, leaving the increment above the cap to fund agency projects rather than feed into city- or county-wide coffers.

As part of what’s become known as the "global agreement" between the city and county, the Omni and Southeast Overtown/Park West Community Redevelopment Agencies are to be expanded in order to be the direct and indirect benefactors of projects such as the Port of Miami tunnel and a new Marlins stadium.

In rating the governments, bond agencies are likely to take into account the revenue the agencies are expected to siphon from the general funds, Mr. DeCarlo said.

"If it’s a really small piece, it’s unlikely to affect their rating," he said. An amount totaling 10% or more of a government’s total revenues "would start getting substantial in the rating agencies’ minds."

However, there’s no way to accurately project the city’s — or agency’s — revenues each year down the line.

But in 2008, Omni intake is to total about 2% of the city’s projected $523.7 million in revenues: about $11.7 million.

In expanding the agencies’ boundaries and extending their lives to 2030 through the global pact, the Omni is projected to garner about $1.8 billion and Overtown at least $1 billion.

Mr. DeCarlo points out that this is revenue the city and county don’t have now, and they’ve still managed to earn stable bond ratings.

"They didn’t have it to begin with," he said. "So the fact that they’re not getting the extra revenue may not impact them."